Oct. 18, 2023
Dear Securities and Exchange Commission, I am writing to provide my comments and concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I acknowledge the importance of enhancing investor protections and addressing gaps in the custody rule, I have reservations about certain aspects of the proposed rule that I believe may have unintended consequences for investment advisers and their clients. Firstly, the scope of the rule's coverage is noticeably broadened to include a wider range of investments held in a client's account. While the intention is commendable, this expansion may require investment advisers to implement additional safeguards and compliance measures, which could place a significant burden on their resources. It is important to strike a balance between investor protections and the practicality of implementation for investment advisers. My concerns are particularly focused on the proposed protections for digital assets or crypto. While digital assets such as cryptocurrency have the potential to transform the financial landscape, their regulatory uncertainties pose challenges. Investment advisers that deal with these assets may encounter difficulties in demonstrating exclusive control, which could result in greater compliance burden and resource allocation. Furthermore, the proposed rule addresses how advisers can safeguard assets that cannot be maintained with a qualified custodian. While the intent is reasonable, the enhanced recordkeeping, separation of duties, and regular reviews required may require investment advisers to allocate additional time and resources. It is crucial to ensure that the burden of compliance is proportionate and does not unduly inhibit the ability of investment advisers to effectively serve their clients. Additionally, amendments to the surprise examination requirement are aimed at safeguarding client assets and reducing the risk of loss. However, the implementation of written agreements with independent public accountants for surprise examinations may impose additional costs on investment advisers. It is essential to strike a balance between protecting client assets and ensuring that the compliance costs are not overly burdensome. The proposed amendments to the investment adviser recordkeeping rule are also of concern. While the intent is to improve oversight and investor protection, the increased administrative burdens associated with maintaining records related to client notifications, custodian information, and transactions could pose challenges for investment advisers. It is important to consider the potential impact on the efficiency of investment advisers' operations, while still ensuring adequate investor protection. Furthermore, privacy and identify theft in the context of digital assets are growing concerns. Allowing numerous third parties to have access to sensitive financial data and personal information, such as social security numbers, raises significant privacy and safety concerns. Additionally, the proposed regulations may inadvertently encourage the storage of sensitive taxpayer information without proper safeguards, creating potential targets for identity theft under the guise of tax reporting. It is imperative to address these concerns and ensure that appropriate data protection measures are in place. In conclusion, while the Securities and Exchange Commission's proposed rule "Safeguarding Advisory Client Assets" aims to enhance investor protections, I believe it is crucial to carefully consider the potential unintended consequences of certain aspects of the rule. It is important to strike a balance between protecting investor assets and avoiding unnecessary compliance burdens on investment advisers. Additionally, the growing concerns around the privacy and security of digital assets must be adequately addressed to preserve investor trust. Thank you for considering my comments on this matter. Sincerely, N.Meyers